BIMB Research said the disposal was consistent with Velesto’s broader portfolio rationalisation and capital optimisation strategy.
PETALING JAYA: Velesto Energy Bhd
’s proposed disposal of its entire equity interest in Velesto Workover Sdn Bhd (VWSB) for RM16.5mil cash is fair and would allow the group to redeploy resources towards its core rig business, BIMB Research says.
Velesto is estimated to make a marginal gain of circa RM0.4mil.
The disposal is expected to be completed by the first half of 2026 (1H26).
It will see the group exiting from the workover segment, which includes well workover operations as well as well plug and abandonment services.
Touching on the rationale for the disposal, BIMB Research said it was consistent with Velesto’s broader portfolio rationalisation and capital optimisation strategy.
“Management is streamlining operations to concentrate resources on its core rig business, where the group has scale, stronger competitive positioning and clearer earnings visibility.
“Workover activities contributed less than 5% of group revenue in the financial year 2024 (FY24), with earnings contribution to Velesto’s bottom line being inconsistent, oscillating between small profits and small losses over recent years,” the research firm noted in the report.
It said the divestment is “earnings-neutral but balance-sheet supportive, and aligned with Velesto’s ongoing efforts to optimise capital allocation and shareholder returns”.
BIMB Research maintained its “buy” call on Velesto with an unchanged target price of 34 sen on the back of expectations of a dividend yield of more than 10% and improving earnings quality.
TA Research, which has a “hold” call on the stock, viewed the disposal as “strategically sensible and operationally positive, though financially immaterial”.
It noted that while the disposal value is modest, the deal structure mitigates downside risk through staged payments and forfeitable deposits.
“Overall, we view the disposal as a clean-up exercise that improves operational focus without materially impacting group earnings,” said TA Research.
The research firm also kept its target price of 26 sen per share based on 8.5 times FY26 forecasted earnings per share and incorporating a 3% premium on environmental, social and governance.
It has also not made changes to the company’s earnings forecasts following the announcement as the disposal gain is non-recurring in nature and therefore excluded from TA Research’s core earnings assumptions.
Shares of Velesto touched 28 sen at the time of writing, up 75% year-to-date.
Earlier this month, Velesto announced the disposal of its jack-up rig Naga 3 for US$63mil or about RM258mil, in line with its ongoing fleet optimisation and asset-light strategy. Notably, Naga 3 was an older asset and had been non-operational throughout FY25 and hence was not contributing meaningfully to earnings, analysts said.
This transaction is also slated to be completed by end-1H26. BIMB Research said it now expects a bumper dividend payout, underpinned by increasingly strong earnings visibility from a more streamlined, higher-utilisation fleet.
